Incentive Based Solutions

I prefer solutions that enable people who have the most investment in the success of the solution to be in the position to influence that success. Right now it’s easy to see the problems created by systems that put disinterested parties–or just the wrong parties–in charge of various activities. Here’s a list of some of these areas and brief solutions.

  • Generals don’t sign for property and therefore none of them get fired when they massively fail an audit. :: Make generals accountable for all the property under their care.
  • The DMV doesn’t care about you being safe (your test weighs all traffic violations the same regardless of their catastrophic consequences). :: Let your insurance company be in charge of issuing drivers licenses.
  • The DMV doesn’t care if your car is safe to drive on the road, but your insurance company does. :: Let the insurance company issue vehicle licenses–and include lower rates for vehicles that are tested safe.
  • The VA doesn’t care about veterans. :: Let veterans own stock in the VA–being realistic, they’ve kind of earned it., right?

You’ll notice that this brief list is directed at government activities. That’s because the government can use force to create systems that serve political realities not the reality the rest of us live in. In addition there are control measures outside of the government to correct poor systems. Wells Fargo created some bad incentives that led to a system of corruption. Their stock prices and customer base responded by taking their business elsewhere.

Each of these systems and their failures really comes down to their isolated measurements. The DMV doesn’t care about safe driving because they’re shielded from the consequences of an accident.  The VA doesn’t care about veteran’s health because it doesn’t get measured on basic things like veteran’s treated.  It has measurements about wait times.  If they applied Little’s Law they might just realize how broken they are.

If people don’t want their tax payer dollars funding projects that don’t have to demonstrate any measurement of success such as $43,000,000,000 gas stations, then maybe it’s time for a change.  Instead of complaining about politics operating the way they do it’s a good idea to understand what were the incentives that led to the outcome and look for ways to change those.

What solutions leave you with the short of the stick?  What incentives created that outcome?  What can you do to change those incentives?